Farmers doing better, but El Niño may return

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Agribiz economist Wandile Sihlobo said that although it has been a good year for production, with record farming growth, the Western Cape remained a big source of concern.

First National Bank senior agricultural economist Paul Makube said: "Things are generally starting to pick up. We're expecting a modest improvement from agriculture that should pick up gross domestic product slightly."

Western Cape was still in the grip of a dry spell, even though other regions had good rains. Grain farmers would be harvesting in a month or two and vegetable farmers, with their shorter cycle should be in better shape, Makube said.

Banks were accommodating farmers with their debt, he said. "Arrangements have been made by banks and the situation has not been too bad."

El Niño may return

The South African Weather Service has warned that El Niño conditions could return at the end of 2017.

In its monthly forecast last week, the service said the El Niño effect would occur in spring or summer and the country's water resources might be under strain. "Recent forecasts say there's a 60% chance, but it's still early days. We will continue to monitor the situation," said Makube.

"We're coming from an extremely wet season, so there's ground moisture, which should help in the new season."

Sihlobo said crops were planted late in the Western Cape and a return of El Niño conditions would hit production.

Dept levels

Farmers had made good on payments, aided by extensions from banks. "Debt levels rose to R160bn but debt is not a problem ... [because of the] banks."

AgriSA senior economist Hamlet Hlomendlini said: "One assumes that, since this season has been very good, farmers are not as constrained as they were before. Farmers are paying their loans and the rate of default is not looking bad at all."

On the government side

Hlomendlini said the government would have to come to the party in the event of another drought to avoid the sort of effect drought had in 2015 and 2016. "Had the government acted swiftly with the last drought, we wouldn't have seen as much of an impact. The threat of El Niño is a concern because we know the impact. Production was cut down to less than half because of the previous drought."

"On the government side, we need to ask questions and see what lessons have been learned.

"SA looked like it was caught by surprise and the government needs to respond quickly to farmers' concerns. They came in late and responded late," said Hlomendlini.

Source: Business Day